Ohio dealers launch new front in anti-Tesla battle

The Ohio Automobile Dealers Association is pushing legislation that it says will amend the state's dealer franchise law to more explicitly ban factory-owned stores.
TESLA V. DEALERS
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Ohio auto dealers are renewing their bid to block Tesla Motors' factory store model.

The Ohio Automobile Dealers Association is pushing legislation that it says will amend the state's dealer franchise law to more explicitly ban factory-owned stores. Association leaders contend that Ohio's existing law should have prevented Tesla from getting licenses for its stores in Cincinnati and Columbus.

"The legislation reinforces what we've always believed the laws to be: that a manufacturer cannot hold a dealer's license to sell vehicles at retail," Sara Bruce, the association's vice president of legal affairs, said Wednesday. "If there was any misunderstanding of what the law is or what the definition of a new motor dealer is, this certainly does clarify it."

Tesla: We comply

A Tesla executive says the electric vehicle maker's stores in Ohio comply with current state law and that the company properly applied for and received the licenses. Tesla's approach doesn't hurt existing dealerships, said Diarmuid O'Connell, Tesla vice president of business development.

"We're not out to eviscerate the dealer business model," O'Connell told Automotive News. "We're out there simply to introduce a new technology in the manner we think is most effective."

While the legislative battle plays out, the dealers association and some of its members also are deciding whether to appeal the dismissal of their lawsuit against Tesla and the Ohio agencies that issue dealer licenses.

A court magistrate dismissed that lawsuit on Feb. 6, ruling that the plaintiffs lacked standing to sue.

Competing testimony

Tesla executives and representatives from the Ohio dealers association testified Tuesday and last week on the proposed legislation at Ohio Senate committee hearings. Previous efforts by the dealers association to amend the statute failed late last year.

James Chen, Tesla vice president of regulatory affairs, told senators Tuesday that passage of the bill would limit consumer choice, stifle interbrand competition and allow Ohio dealers to establish a monopoly that current law does not allow.

Joe Cannon, vice president of government relations for the Ohio dealers association, told senators that Tesla's store licensing opens the door for all manufacturers -- both emerging and existing -- to follow the same path. That puts dealership employment and the substantial investments dealers have made in their communities at risk, he said.

Stores would stay

Dealers aren't trying to prevent Tesla vehicles from being sold in Ohio, but Tesla should have to comply with the same rules that dealers and other auto manufacturers must follow, Cannon said.

The bill's proposed changes aren't retroactive, Bruce said. Tesla will be able to continue operating its Ohio stores even if the legislation is adopted.

But the legislation would halt Tesla's ability to grow, O'Connell said. Tesla plans more Ohio locations, but it has not yet applied for more store licenses. Although Tesla has sold fewer than 200 vehicles in Ohio thus far, executives see plenty of potential.

"Ohio is a great car market," O'Connell said. "We've had a great reception there to date."

Other state battles

The face-off in Ohio continues Tesla's state-by-state conflicts with dealers over factory-owned stores.

In 2013, the company battled dealers in several states, including Massachusetts, New York, Texas, North Carolina, Minnesota and Virginia. Results have been mixed.

Tesla lost a prominent showdown with Texas dealers over Tesla-backed bills that would have carved out an exemption to state law restricting factory-owned dealerships. But in Minnesota, North Carolina and New York, Tesla held at bay dealer-backed legislation that might have crimped the EV maker's plans. The company also won court decisions in dealer lawsuits in Massachusetts and New York.

Tesla CEO Elon Musk has said he will consider seeking action on the national level, either through federal legislation or a federal lawsuit.

According to the National Automobile Dealers Association, 48 states have restrictions on factory-owned dealerships. Of those, Tesla has said, about 20 have statutes that make Tesla's factory store model difficult.

You can reach Amy Wilson at awilson@crain.com.


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